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The Minimum Wage has a Nasty Bite

True Cause or Excuse

The minimum wage is well known but there are still some employers, across many sectors, who choose to skate on thin ice.   Those organisations fail to pay the correct amount because of:

  • Insufficient funds;
  • Failure to take into account all the operational hours expected of staff;
  • Ignorance;
  • An “I’ll chance it” attitude.

The latter is more prevalent than I thought judging by conversations with employees and managers.  HMRC has the power to deal with miscreant senior managers by naming and shaming the company and taking action to penalise the organisation.  Let us hope that HMRC pursues such employers as they undermine the competitiveness of rivals and the reputation of organisations generally.

Understanding What Counts as Work for Minimum Wage Purposes

Senior Managers should remind their operational managers of the need to ensure that all the relevant time an employee spends ‘working’ has to be included in the calculation as otherwise an individual may be paid less than the minimum wage when all the hours are divided by the pay rate.

Managers need to be clear about what activities count as work, for example:

  • All the hours that an individual is required to work;
  • All the hours that a member of staff is required to be available for work including on standby**;
  • Drivers delayed when delivering or collecting goods;
  • Breakdown of equipment or interruption of a process but the individual is still required to remain ready for work;
  • Travel between working locations or to training courses (exclude travel from home to work);
  • On call duties such as care assistants who are required to be available for work.

The time spent on designated rest breaks, lunch breaks etc are not counted unless the employee is required to be available for immediate recall to his/her duties.  ** The hours of care assistants or hospital staff who are ‘on call’ but allowed to sleep in a place provided by the employer – those hours do not count for minimum wage purposes.

Managers should review their contractual terms, collective agreements and any policies about on call/standby duties to ensure that all parties are clear as to what hours will or will not count as that will save frustration and anger in the future.

Salaried Staff & Piece Workers

This is an area in which employers can be easily caught out as the actual number of hours that an individual works may mean that his/her salary is below the hourly rate.  Beware assuming that the stated contractual hours are all that is worked.  Check with the staff and supervisors how many hours are worked.  Then, check the maths to determine what hourly rate is being paid in reality.

Piece workers have their hourly rate calculated in a different way.  Basically, you are advised to use a Fair Wage Rate calculation.  Details of that can be found on the ACAS and Gov.UK websites – use this link.

Test the Maths

It is interesting to check the actual hourly rate that your organisation pays.   When you start to add in all the actual work and deemed work hours, you could well find that the hourly rate has dipped below the minimum hourly rate.  Periodically, take a few actual cases and just divide through the amount paid to an individual by the reckonable working hours.

That check has several advantages:

  • Highlighting cases in which the hourly rate is close to the minimum and so a regular review should be undertaken to ensure that you do not place your organisation at risk of being named and shamed;
  • Identifying individuals/teams who may be underpaid when all the hours are taken into account – you can then take control to rectify the situation;
  • Reviewing whether there is a more effective way to organise the hours/work activities.

Why Bother?

By taking the initiative, the employer can help to build more trust in the workplace and rectify or monitor rates of pay that could slip under the minimum rates.  You may also save the company money.  A recent case led to an employer paying out £14,000 to one employee and £4,000 to another because all the hours had not been taken into account

© 2016 HR Management Dimensions Ltd.

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